This chapter covers the following topics:
A Prefunding Pool is an arrangement between a lessor and a vendor that establishes a credit line that allows for monies to be disbursed in advance to the Vendor in anticipation of future contract or deal originations by the vendor. You can search for, create, update, or end date or terminate prefunding pools by navigating to the Prefund Pools subtab under Vendors.
Once the prefunding pool is approved, there is an Initial Payout amount (specified for the pool) that is disbursed to the vendor. When a contract is booked and funded for the vendor, the funding of the contract results in a Drawdown transaction that reduces the pool balance.
You can create new pools, submit them for approval, increase pool amounts, decrease pool amounts, terminate a pool or end date it using an adjustment request. Any decrease or termination of a pool results in a receivable invoice to the vendor for any outstanding pool balance or to adjust the pool by the decrease amount. Pool balances are reduced by the amount of any eligible disbursements for which the pool is approved. You can view balances and pool transactions by navigating to the Transaction History tab.
Note: Approval is not required to reduce pool balance or end date a pool.
You can increase or decrease the pool amount, and terminate the pool from the Pool Funds tab of the Prefund Pool Details page.
Click the Update button.
Click Add Row to create a transaction.
Enter the following details:
Request Type: Select Add or Reduce from the drop-down list.
Request Date
Amount
Note: The due date for Add transaction will always be the system date.
Click the Submit button to submit the transaction for approval.
The pool balance is increased only upon request approval, and the resulting AP invoice paid in full. Similarly, for transactions of type Reduce, AR invoices are raised. On successful creation of AR invoice, the balance on the pool is reduced.
If the Terminate button is clicked from the Update page, then the pool is terminated as of system date. Any unconsumed pool balance is refunded by vendor through AR invoices generated by the system.
Important: Existing vendor disbursement terms do not apply to prefunding disbursements and such disbursements cannot be combined or consolidated with any other type of disbursement.
The concurrent program, Pool Management, processes eligible disbursement transactions like Asset, Expense funding, and so on. The program applies disbursement transactions to the pool based on:
Disbursement types
Vendor sites on the transaction and pool
Note: Due date of the funding request should be equal to or less than system date.
The following rules apply when associating a pool to a vendor funding or passthrough:
The pool must be active, not inactive or terminated, and have a sufficient balance to cover the funding request amount.
The pool must be active on the first date of the passthrough line (due date of passthrough AP invoice)
The vendor and vendor site of the funding request or passthrough vendor must match the prefunding pool.
The pool must be valid for the disbursement type selected (for example, asset, expense, or passthrough).
Deduction transactions originating in Oracle Lease like funding or passthrough disbursement is accounted in Oracle Lease. These transactions are not interfaced with Payables. There are two accounting events, transaction creation and transaction application to the pool. The following table contains the accounting setups:
| Pool Event | Event | Accounting Template | Transaction Type | Stream |
| Pool Add | Funding | FUNDING-PREFUND POOL | Funding | PREFUNDING POOL PAYABLE |
| Pool Reduce or Terminate | Billing | BILL- PREFUNDING POOL RECEIVABLE | Billing | PREFUNDING POOL RECEIVABLE |
Prefunding is the funding to vendors performed on Contract before the contract is booked without reference to particular assets on the contract. You can advance monies to vendors for the assets in progress before the contract is booked. You can raise prefunding requests, for which payable invoices are generated.
The Terms and Conditions for Prefunding capture the following details:
| Field | Description |
| Interim Interest | Select Billed, Capitalized or Exempt/Waived |
| Bill at Booking | Select this checkbox if you want to bill at the time of booking |
| Bill To | Select Lessee or Vendor |
| Interest Calculation Formula | Select the formula you would like to use for interest calculation from the list of values |
| Interest | Select Fixed or Floating |
| Interest Index | Select Interest Index from the drop-down list |
| Adder Rate | Capture adder to the interest rate derived from the Index |
| Base Rate | For Fixed Rate Interest, this is the interest rate |
| Late Charge | Select Billed, Capitalized or Exempt/Waived |
| Late Charge Policy | Select your late charge policy from the list |
If you select Interim Interest as Exempt, Late Charge cannot be Billed or Capitalized. Interim Interest and Late Charges are not calculated and they will remain exempt. You can waive them before booking of the contract, in which case also they will not be posted.
If you select Interim Interest as Capitalized, Late Charge cannot be Billed.
If you select Interim Interest as Capitalized, you cannot change it to Billed or Exempt after the first run of the Interest Calculation program.
If Interim Interest is updated from Billed to Capitalized, then even the late charge calculated previously will be capitalized.
The Interest Calculation program is used to calculate and bill the interest, and is used when the Interim Interest option is set to Billed. It calculates the Interim Interests on the prefunded amounts. You can associate a formula for calculation of the interest.
Days convention for interest calculation is derived from the Streams Generation template applicable to the contract. Actual/360 and Actual/365 are the two options available.
Interest calculation for each individual prefunding request considers Days Outstanding for calculation of interest as follows:
For a new prefunding request, days between actual funding date and To Date on the interest calculation program.
For a prefunding request which exists from the earlier interest program, days between last interest program To Date to the current interest program To Date.
An accrual transaction is created for the Interim Interest amounts for a particular month. Accruals are created for an amount equal to the interest amounts as calculated by the formula. You have to define an accounting template for Accrual Accounting for these amounts.
Billing programs pick up amounts calculated by Interest Calculation program and Late Charges program and bill the amounts.
Billable amounts are billed based on Monthly or Bill at Booking options.
Accruals transactions for Bill At Booking option is generated at the time of the Interest Calculation program run for the amounts calculated as interests.
Late Charge program derives late charges on Interim Interest invoices before booking of the contract.
Late charges are not calculated if the Interest option is Capitalized, Exempt or Bill at Booking.
Billing at booking is triggered at the final step of contract booking, after contract approval.
Provide the assets details for capitalization at the time of creating prefunding requests.
Interest and late charges capitalization to assets are directly based on the identified assets. If prefunding requests are created without asset details, then the interest and late charge capitalization are prorated based on the asset's Original Equipment Cost (OEC) existing at the time of the prefunding requests.
Accrual transactions are not created for Interim Interest if the Interest Calculation option is Capitalized.
Capitalization is triggered when you navigate to the Summary tab of the contract before booking.
You can update Interest option from Billed to Exempt or Capitalized.
If Invoices are generated under the Bill option initially, you can update the option to Capitalize or Waiver just before booking of the contract. If invoices are generated and circulated, then those invoices have to be closed through automatically generated credit memos. Interest accrual also has to be reversed. The invoices are closed through credit memos.
If invoices are receipted, then you cannot make this update.
If prefunding is against identified assets under construction, build and so on, then you can associate the asset details against prefunding requests. This association of payments (funding) made for specific assets:
generates the proper asset-level accounting and trial balances
has an auditable trail that assets have been paid for in the event that title needs to be verified or proven (for example, for a repossession)
Progress Payment is the funding to vendors performed on contract before the contract is booked with reference to particular assets on the contract. The payment is towards the progress made on the assets for intended use.
Use the Fund Asset funding type to capture prefunding amounts against assets. Interim interest is prorated to all assets based on the OEC if the Interest option is Capitalized for prefunding, and to assets identified for progress payments.
Use Fund Assets funding type for prefunding if the assets are identifiable at the time of prefunding.
Interest calculation logic leverages the Day conventions of Actual/360 or Actual/365 from the contract product's Stream Generation template.
Interim interest is prorated to all assets based on the OEC if the Interest option is Capitalized for prefunding and to identified assets for progress payments.
Interest parameters cannot be updated after interest calculation.
Short funding is the process of adjusting or netting funding transactions in which the vendor owes to lessor, by adjusting the Payable and receivables at the same time. The short funding feature enables the user to select the eligible AR targets to credit off against the short funded amount. Short funding process consists of the following:
Creating a Short Fund request.
Associating the funding request (AP Target).
Selecting the AR Targets (which decides the amount of the Short Fund).
Automatic netting of Receivable and Payables.
You can search for, create, update, cancel and submit a short fund request from the Funding Requests page under Risk Management.
Perform the following steps to create a short fund:
Navigate to Risk Management: Funding Requests and select the contract for the short fund request.
Under Funding Requests, from the Create Funding Request of Type list, select Supplier Retention. Click Go.
Fill in the required information in the Create Funding Request: Funding Request page. The Amount is defaulted from the funding request number entered. Payment Term, Pay Group, and Date Due are defaulted from the funding request number selected as AP target.
Select Invoice Type as Credit.
Select a Related Funding Request number from the list of values for association with the short fund request.
Funding requests created on the current contract (same contract on which short fund is created) are available on the list.
The amount outstanding on the funding request automatically gets populated in the amounts columns of the short funding request.
The AR targets should be less than or equal to total of AP target.
The funding request should be against the same vendor for which the short funding is being created.
Click Next to navigated to the Short Fund Details page. This page is used to record all the classes of AR targets whose open balance is netted off during the processing of short fund request. The page also displays the netting off status, amount, and AR credit memo details after the short fund request is processed.
The eligible vendor obligations are:
Advance payments - Down payment, security deposit and the advance monies received on rental. These are the payment made by the Lessee or customer directly to the Vendor.
Outstanding AR invoices against the vendor or AR invoices directly created in AR.
Dealer subsidies.
Termination quote amount. This includes Tax lines and Bill not paid AR Invoices as well and all charges on the termination quote like penalties and fees.
Enter the Receivables Targets for netting.
Click Next and select the Finish button.
Submit the short funding request for approval from the Funding Requests table.
Once the request is approved, the existing disbursement interface creates a payable invoice and credit memo equivalent to the sum of the targeted vendor obligations with the approved amount.
In case of short fund for Termination Quote and Advance Monies, the netting process creates on-account credit memos irrespective of whether AR Invoice exists. The application of relevant invoices to on-account credit memos are done once the invoices are available in AR. The application of on-account credit memos to AR invoices from the advances are performed by the Short Fund Application concurrent program. You can schedule this daily.